Pennsylvania Legislators can use Tax-Free Per Diems for Home Purchase . . .What about taxability issues or fraud possibilities?

I tripped across an interesting article in the Pennsylvania Independent about a fascinating perk that is available to our Pennsylvania senators and representatives.  Did you know that our legislators can use their per diem ($154) towards an investment home purchase? 

I wonder how many of our state legislators have taken advantage of this apparently ‘legal’ perk?  Using government tax-free per diem for home purchase leaves me wondering about the taxability issues . . . and what about fraud possibilities?   Interesting to have this discussion as the state’s General Fund budget of $29 billion is expected to pass today.  Remembering last year’s late budget which took a catastrophic toll on thousands of Pennsylvania’s residents, makes you wonder about this perk of our elected officials, doesn’t it?

    Per Diems Can Be Used to Purchase Homes

By Darwyn Deyo

Despite the budget deficit facing the Pennsylvania legislature this year, representatives and senators are able to use tax free per diems to cover the cost of their housing, even if they live within 50 miles of the Capitol.

“If you live within 50 miles of the capitol you’re not eligible for the housing per diem. There’s nothing in the regulation that says you’re eligible for a second mortgage,” said Eric Epstein, coordinator for Rock the Capital. “Per diems were not designed to underwrite home mortgages or provide equity. If per diems are being used as an investment vehicle then we need to look beyond ethical lapses and explore tax fraud because they may be eligible. If they use the money as an investment and are accruing interest, that should be a taxable event. If they are harvesting an interest break off a mortgage payment, that’s a taxable event.”

Per diems can also be used by legislators who live within 50 miles of the Capitol but travel beyond that for committee meetings.

The Internal Revenue Service’s daily per diem limit for Harrisburg is $154, which would cover the cost of a hotel in the area, but some legislators, including State Reps. Todd Eachus (D – Luzerne) and James Wansacz (D – Lackawanna), purchased homes near the Capitol. While a per diem for housing at a hotel would cover the cost only of each night at the hotel, applying a per diem to a mortgage creates a commodity the owner can re-sell at a later date. Per diems, for example, can be used for travel expenses but not for the purchase of a new car. Mr. Wansacz also spoke with high school students last week as part of a forum on youth and government at Keystone College, where the representative answered questions on putting in for per diems for take-out meals.

Beyond the housing-as-investment use of per diems, however, lays the taxable element. Whereas a non-legislator is required to pay taxes on their income and then budget for items like housing, meals, and travel, a legislator using tax free per diems to pay for housing, meals, and travel essentially receives a supplement to their legal salary, a supplement controlled by rules set by legislature itself.

In an interview with the Scranton Public Policy Examiner, Mr. Wansacz said “There is nothing illegal about accepting per diems.  I can tell you, the House and the Senate would have to change that next session.  If that comes up for a vote, I would have no problem changing that.  I have to show that I have living expenses.  What I can tell you is that I’m not making any money off this.  I’m not a wealthy individual.  The only income I have is my salary.”

But Mr. Epstein said per diems are rarely denied and the legislature doesn’t even require receipts or vouchers to reimburse.  Pennsylvania taxpayers cover about $2.7 million a year in reimbursed per diems. If taxed at Pennsylvania’s current income tax rate of three percent that would put $81,000 back into the General Fund.

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  1. Thank you for this item. This is just another example of the fraud by our elected representatives. We need term limits in local, state and national levels. The ironic thing is that we continue to send these folks back – regardless of party…

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